Guj NRE bid to ease debt pain

Calcutta, April 24: The board of directors of Gujarat NRE Coke Ltd has decided to offer 7.22 crore equity shares to its lenders as part of a corporate debt restructuring plan.

Besides this private placement, the metallurgical coke producer will issue 6 crore convertible warrants to promoter group entities, which will lead to a capital infusion of Rs 60 crore.

Holders of warrants have the right to convert the instruments to shares later.

Among the private placement to banks, 1.22 crore shares will be allotted to ICICI Bank and 6 crore shares to any of its other lenders. This will help the banks to convert their debts to the company into equity as part of the debt relief package approved last month.

Gujarat NRE today informed the Bombay Stock Exchange after trading hours that it would seek shareholders’ approval for the private placement.

The bankers of Gujarat NRE are the State Bank of India, Bank of Baroda, the State Bank of Hyderabad, Standard Chartered Bank, Axis Bank, ICICI Bank, Tamilnad Mercantile Bank and DBS Bank.

Banks usually prefer to restructure the debts of a troubled borrower to prevent the advances from being classified as non-performing assets. This lowers the banks’ provisioning requirement and improves their bottomline.

Gujarat NRE’s loan tenure has been extended to 10 years with a two-year moratorium on interest payment.

The debt recast package also entails a fresh term loan of Rs 50 crore for the completion of a power plant at Dharwad in Karnataka and an additional need-based working capital loan of up to Rs 370 crore. The power plant will use the waste heat generated by the company’s coke oven battery unit there.

Gujarat NRE’s operating losses stood at Rs 321 crore for the third quarter ended December as the sales of met coke — an input required for the smelting of iron ore — continued to decline during the quarter.